Well this article is not full of much good news at all but forewarned is forearmed as my old pappy used to say so let’s just dive right in and learn about two pricing increases which may affect you if you are purchasing a home.
Mortgage Default Insurance
Let’s start with a quick refresher.
There are three mortgage default insurance companies in Canada: CMHC, Genworth and Canada Guarantee.
When you are purchasing a home with less than 20% down you will be required to pay a set percentage of the purchase price, less your down payment, to one of these companies.
This insurance is solely for the benefit of the mortgage provider. Basically they are able to lend to those of us with less than 20% down because these companies are insuring them against financial loss if you default on your mortgage loan.
Last week they announced that those people who are purchasing a home with less than 10% down are now considered to be a higher risk and so they have decided to assess a higher insurance premium on these clients.
The new rate for a loan-to-value ratio up to 95% is 3.6% up from 3.15%.
For a loan-to-value ratio from 90.01 to 95%, but a non-traditional down payment, the premium climbs to 3.85% from 3.35%.
A non-traditional down payment is generally where you borrow the down payment from a secondary source. To put that in perspective, if you are purchasing a home worth $250,000 you will be looking at paying $5.20 more per month. This change will take effect June 1, 2015.
Land Title Fee Increase
In the most recent budget set forth by the provincial government a pile of fee increases were announced. One of these was the Land Title fee. Land Titles is the governmental agency which registers legal documents against the title of a property. Mortgages, Builder’s Liens, Utility Right of Way and Transfer of Title are a few examples.
For our purposes we will be looking at the fees changes to registering a mortgage and a land transfer.
Current land transfer and mortgage registration fees are $50 plus $1 per $5,000 on the value registered. That translates to about $270 on a $500,000 purchase.
After July 1st this will go to – a registration fee of $75 plus $6 per $5,000 registered which translates to $1,280.
A quick mental calculation shows the increase to be just over $1,000!
This fee is collected from you at the lawyer’s office but don’t blame them. It certainly was not their decision. You should probably budget about $2,500 for the increase and the legal fees going forward for a standard transaction.
So fees have definitely increased which is certainly something that I want all of you to be aware of.
Have a great week everybody.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.